DeLong: Let’s spend until the financial markets say we can’t

July 20, 2010

Niall Ferguson appeared in the Comment section of today’s Financial Times. In typically noxious form, he calls for a return to Thatcher and Reagan and to policies that promote “private sector confidence”. This later term requires a bit of translation: “private sector” refers to the owners of great wealth and of large businesses and NOT to the private sector workers who labor for them. “Confidence” is achieved by lowering taxes on income and capital gains, refusals by governments to spend in order to alleviate widespread misery, and instituting policies that reduce security and benefits for workers.

Luckily, Brad DeLong also appeared in the same Comment section. There is clearly great animosity between the two. What wisdom does this well known current era Keynesian proclaim? Forget it if you live in Greece, Ireland, Spain, Portugal, or Italy. Nothing but more austerity for you. Learn to live with depression era unemployment. Thankfully us ‘richer’ folks in Germany, Britain, America, and Japan, can spend more for now. But how long can we do this?

“Trust me, we will know when the time comes to stop expansion. Financial markets will tell us.”

The term ‘financial markets’ also needs translation as it’s far too vague and inhuman. Let’s put flesh on the bone and call it what it is: concentrated wealth. So DeLong’s view is that we as society can spend as long as we have permission from concentrated wealth. Wealth has withdrawn permission from the PIIGS but we are fortunate to still be in their quasi favor. Note that neither the level of societal need or its productive capacity are the determining factors – we must stop expansion when the ‘financial markets’ tell us.

The lack of vision of the economic ‘left’ is staggering. Keynes is rolling over in his grave.